As a retirement income specialist, I see many instances of people not fully understanding the OAS benefits available and missing out on benefits they are entitled to.
The Old Age Security benefit (OAS) is for Canadians age 65 and older. It is based on residency in Canada.
OAS is a lifetime pension indexed to inflation that is not based on contributions or work. The normal start date is age 65. However, if you defer beginning your benefits till age 70, you can increase this pension by 36%. In fact, each month you delay can increase it by 0.6%. It is not an all or nothing decision to delay. It is important to know that if you have net income above the threshold, you may want to look at deferring so that you are benefiting from the increase. This benefit can help to form a base level of guaranteed income indexed to inflation. Having the option to defer it to increase this benefit is significant.
I have seen many that begin OAS at age 65 while still working, only to be faced with it all being recovered back and they miss out on the increases because they started it.
There is much confusion around whether the benefits begin automatically or not. It varies and causes many difficulties in people making the best decisions for themselves. Some will receive a notice just prior to age 65 saying it will automatically begin at age 65 and they have the option to defer it. If someone misses or doesn’t understand this notice, and is still working or has other high income, they potentially can lose out on benefits they otherwise would be entitled to.
The other side to this is that people are over age 70 and still have not applied for OAS benefits. Some don’t know about them at all, while others assume they make too much income and it would be taxed back anyway, so there is no point to applying.
This is the situation to look at more closely. Once you turn 70, there is no more increase in benefits that you are accumulating by delaying and you can only go back for retroactive benefits for 11 months. Once you are 70 years and 11 months, if you have not applied, and your net income is below $151,668, you are losing benefits that you are entitled to and cannot recover these benefits.
Why does this happen? It happens easily because people don’t know what their net income actually is or how to project or estimate it. They wrongfully assume they make too much when it is not the case after income splitting and other tax strategies in retirement. The other situation is that maybe they are correct and wouldn’t be able to keep any of it because their income is too high. This may not be the case further into retirement. After age 75, the threshold is higher with the 10% increase and over time, perhaps their net income is lower in the later years.
If you have lived in Canada for at least 40 years between age 18 and 65, you would receive 100% of the benefit. If you have lived in Canada at least 10 years between age 18 and 65, you would receive a partial benefit. To calculate your partial benefit, divide the number of years in Canada (between age 18 and 65) by 40 and that gives you the percentage of the maximum benefit you would receive. For example, let’s say you lived in Canada for 22 years. 22/40 = 0.55. 55% of the maximum benefit. The maximum benefit for those 65 - 74 is $727.67/m in 2025. The maximum benefit for those 75 and over is $800.44/m in 2025.
You can still receive OAS outside of Canada if you move out of the country. Benefits would continue for 6 months if you had lived in Canada less than 20 years (after age 18). However, if you lived in Canada 20 years or more, you can continue receiving the OAS benefit while living abroad.
As many people are aware, if your income is too high in retirement, you can have your OAS clawed back. This is frustrating to many, but proper planning in many cases can avoid this.
The “clawback” is called a recovery tax. If your net income is above the threshold, you will have to repay 15% of the amount over the threshold until it is all “recovered”. The threshold in 2025 is $93,454. Once your net income is above $151,668, it is all taxed back for those under age 75. If age 75 or older, the net income would need to be at $157,490 for it to be all taxed back. This is because at age 75, your OAS benefit is increased an additional 10%.
With the ability to split some types of income in retirement between couples, the net income can be reduced to a level that both, in many cases can still receive most or all of their OAS benefits.
This is one of the many areas in retirement planning, where a critical decision is being made that affects the rest of your life.
